Commentary
Upfront Ad Price Inflation Vs. Consumer Cost Inflation: Who Wins This Battle?
- by Wayne Friedman , Staff Writer, April 19, 2022
For years, double-digit TV upfront price inflation has been as common as pre-COVID handshakes or slaps on the back. But what about surging consumer price inflation? No sign yet.
This year, we know the other side of the story -- where actual U.S. price inflation for consumers is now at an alarming 8.5% in March.
Three months ago, overall media inflation was projected to lag consumer price inflation. But perhaps not for TV.
TV's upfront marketplace is its own animal. And based on the supply-and-demand trend of the past three decades, it is way up.
Pick a double-digit increase -- 10%, 15%, or 20% -- and you will be probably be in the ballpark.
The upfront ad market -- sometimes called a "futures" market by some -- focuses on looking far out, 16 months or longer.
The lure is to buy ahead of the TV season and to pay 50% to 75% less than you would nearer to time of air, in the quarterly scatter markets.
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Marketers have long sought an alternative -- with the emphasis on "sought."
Marc Pritchard, chief brand officer of Procter & Gamble, has long called for a better TV upfront-scatter market scenario -- something more akin to what he sees on the digital media side of things: Buying closer to airtime, with nary a sign of a "makegood" obligation.
That doesn’t seem possible -- at least not for regularly scheduled, scripted and unscripted linear TV programming on broadcast and cable, which continues to shrink in viewership size.
Demand still works in the TV networks' favor. That's because TV's reach -- although it continues to shrink -- is still desired.
So the bigger question is whether new streaming platforms can take up the slack now -- and increasingly in the future -- with expected, expanded levels of ad inventory.
Right now, we don't see much of that growing quickly.
ECI Media Management estimates digital ad prices in North America are expected to be 5.4% more expensive this year.
The same group says overall U.S. TV ad price inflation will rise by around 15%, while overall U.S. inflation rate is expected to average 7% for this quarter.
Do the math. TV price inflation continues to outpace all others.
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
Wayne, it's generally true that price inflation for "reaching" TV "audiences" has risen faster than the overall average---though some other products and services have also seen huge spikes in their cost to consumers.
But all goods and services aren't equal. For example if the cost of beef triples few consumers will stop eating meat---they will switch to some other form of meat---fish, chicken, etc.--that is more affordable. Not so with TV advertising as for most branding campaigns it's the cornerstone of their communications strategy---they wont switch massively to print media, radio, digital banner ads, etc. They may be forced to evaluate more forms of "TV" than they are accustomed to---though these are usually even more expensive ways to reach consumers---but they will continue using "TV"-which is why they will pay its rising CPMs so long as they are bearable.
It may well be that certain types of TV---super high CPM sports, for example---- will eventually price themselves out of the picture ---even for advertisers who are wedded to them---like sports advertisers---but so far this hasn't happened.
And further, as traditional TV is linear its ad-load is finite.
Let's say it was 15 ad minutes per hour and that all the ads were 15s. That's 60 per hour which is a daily maximum of 1,440 ads. If we factor in that not all ads are 15s it's more likely to be 1,000 ads per day. If we also factor in that few (if any) brands only run the ad once per day, it's more likley to be 500 (or less) discrete ads per day.
In essence the factor of demand vs. supply is a major influence on price.
Unlike traditional TV, the digital world's ad volume (so far) appears to be infinite. Got a new advertiser? ... we can create some more advertising space! And if we have a surplus of supply over demand we can always drop the rate to a more attractive CPM. [And yes Ed, I know that the metrics used for comparison are disparate.}
John, the problem is that TV's ad load is not finite. There are no restrictions on the amount of time a seller can allocate to commercials---only self-imposed limits set by the sellers, themselves. As a result, thanks to rating fragmentation and the evident disinterest of advertisers, TV time sellers have more than doubled their commercial clutter over the past 25-30 years in order to compensate for lower ratings and the numbers are still rising. Who is to say where it will end. I wouldn't be surprised to see TV's ad load to rise as high as 40%, eventually.